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SF, SJ Among Top 10 Cities For Renting Rather Than Buying A Home

A sign advertising an apartment for rent is displayed in a window in San Francisco. (Justin Sullivan/Getty Images)

(CBS MoneyWatch) You’ve been told time and time again that buying a home is a better financial option than renting. But that’s not true everywhere. Despite the affordability of today’s homes in much of the United States, there are a few cities, especially in California, where renting might be a better bet, at least in the short run.

Comparing buying versus renting costs is all about identifying the break-even point. It’s a given that buying a home is more expensive upfront than renting. But at some point, owning typically becomes less expensive than renting.

The question is: how long does that take? If it takes more than a couple years before owning costs less than renting, you might be better off financially as a renter, especially if your long-term plans aren’t that certain.

Real estate research firm Zillow did the math and factored in all kinds of possible costs, including monthly rent and mortgage payments, insurance, property taxes, maintenance and closing costs, and expected price appreciation to come up with the exact point at which buying becomes less expensive than renting. They found that both San Francisco and San Jose ranked in the top 10 among U.S. cities where renting is a better value. Here’s why:

In San Francisco, which tied with San Diego as the 9th best place to rent, it’ll take a while before buying becomes cheaper than renting — 3.4 years to be exact. Downtown is the most expensive area in the city to buy a home, but no district offers a break-even point before two years.

San Jose takes third on the list, thanks to rapidly rising home prices. It takes on average 3.7 years to break even there. But if prices keep going up, it could make buying even less desirable financially.